Required: 1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses.
Valley Company's adjusted trial balance on August 31, 2018, its fiscal year-end, follows.
Debit Credit
Merchandise inventory $ 33,500
Other (noninventory) assets 134,000
Total liabilities $ 38,693
Common stock 10,000
Retained earnings 102,124
Dividends 8,000
Sales 229,140
Sales discounts 3506
Sales return and allowances 15123
Cost of goods sold 89129
Sales salaries expense 31392
Rent expense selling space 10770
Store supplies expense 2750
Advertising expense 19477
Office salaries expense 28647
Rent expense office space 2750
Office supplies expense 917
Totals $379,957 $379,957
On August 31, 2017, merchandise inventory was $27,035. Supplementary records of merchandising activities for the year ended August 31, 2018, reveal the following itemized costs.
Invoice cost of merchandise purchase 98490
Purchase discounts received 2068
Purchase returns and allowances 4728
Costs of transportation-in 3900

Valley Company

1. The company's net sales for the year is:

= $210,511.

2. The company's total cost of merchandise purchased for the year is:

= $95,594.

3. Multiple-step Income Statement for the year ended August 31, 2018

Sales                                                        229,140

Sales discounts                                         (3,506)

Sales return and allowances                   (15,123)

Net Sales                                                 210,511

Cost of goods sold:

Beginning inventory          $ 33,500

Purchases                             95,594

Goods available for sale  $129,094

Less Ending inventory         27,035       89,129

Gross profit                                            121,382

Selling Expenses:

Sales salaries expense         31,392

Rent expense selling space 10,770

Store supplies expense        2,750

Advertising expense            19,477      64,389

General and Administrative Expenses:

Office salaries expense     28,647

Rent expense office space  2,750

Office supplies expense         917       32,314

Total expenses                                   96,703

Net Income                                         24,679

4. Single-step Income Statement for the year ended August 31, 2018

Net Sales                                                 210,511

Cost of goods sold                                  89,129

Gross profit                                            121,382

Selling Expenses                                    64,389

General and Administrative Expenses  32,314

Total expenses                                      96,703

Net Income                                            24,679

Explanation:

a) Data and Calculations:

Valley Company's adjusted trial balance on August 31, 2018, its fiscal year-end, follows.

                                                 Debit          Credit

Merchandise inventory         $ 33,500

Other (non-inventory) assets 134,000

Total liabilities                                         $ 38,693

Common stock                                           10,000

Retained earnings                                    102,124

Dividends                                  8,000

Sales                                                        229,140

Sales discounts                        3,506

Sales return and allowances  15,123

Cost of goods sold                89,129

Sales salaries expense         31,392

Rent expense selling space 10,770

Store supplies expense        2,750

Advertising expense            19,477

Office salaries expense     28,647

Rent expense office space  2,750

Office supplies expense         917

Totals                            $379,957      $379,957

Net Sales:

Sales                                       229,140

Sales discounts                        (3,506)

Sales return and allowances  (15,123)

Net Sales                                210,511

Total cost of merchandise purchased:

Purchase                                         98,490

Purchase discounts received         (2,068)

Purchase returns and allowances (4,728)

Costs of transportation-in               3,900

Total cost of purchases =             95,594

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